New US tariffs are expected to curb Brazilian beef tallow exports to its largest overseas market, increasing domestic availability and potentially channeling more supply into biodiesel production.
Brazilian beef tallow now faces a combined 37.5pc import tariff into the US, comprising a new 12.5pc duty imposed by the administration of President Donald Trump on 24 July and an existing 25pc tariff on Brazilian imports effective since 22 July.
The feedstock has lost its competitive edge in the US Gulf coast market, which is a major demand center. Including beef tallow costs, freight costs for cargoes of up to 5,000 metric tonnes (t), the recently imposed tariffs and the value generated by the 45Z clean fuel production tax credit — which could be viewed as an additional cost since it only applies to US domestic feedstocks — imported Brazilian tallow carries an effective cost of around $1,936/t, according to Argus calculations. By comparison, US tallow at the US Gulf coast is available at roughly $1,700/t.
Market participants expect only limited volumes of beef tallow to continue flowing to the US, primarily to producers that can take advantage of duty drawback provisions. These provisions allow some renewable diesel and sustainable aviation fuel (SAF) producers to recover duties paid on imported feedstocks when the finished fuel is subsequently exported to destinations such as Canada, Europe and other international markets.
1H export drop
Brazilian tallow exports had fallen by approximately 40pc to 141,000t in the first half of 2026 from the same period in 2025, according to trade ministry Mdic data. This reflected the impact of previous US import tariffs, which created market uncertainty and disrupted trade flows to the product's primary export destination.
Brazilian beef tallow prices are trending downward as export demand weakens following the closure of the US arbitrage. Further losses, however, are likely to be limited by production costs and slower cattle slaughter rates after Brazil filled its beef export quota to China, reducing tallow output. A drop in the price of the feedstock material will be insufficient to reopen the arbitrage opportunity to the US in the short term, according to traders.
Falling beef tallow prices are likely to boost demand from biodiesel producers with the flexibility to process waste-based feedstocks. Tallow in Brazil's central-western Mato Grosso state is currently priced at R5,150 ($1,009)/t, a discount of R625/t to soybean oil, according to Argus indicators published on 24 July. But demand for the biofuel is not reacting as expected, given the backdrop of the conflict between the US and Iran, which has driven up fuel prices and altered economic dynamics worldwide.
External demand
With Brazil facing the highest tariff burden, US biofuel producers could increasingly turn to alternative sources of tallow, including Australia, New Zealand, and potentially Europe and other South American countries.
More favorable tariff treatment for Asian suppliers could also support continued imports of used cooking oil (UCO) into the US, displacing some demand for tallow. But UCO arbitrage opportunities have narrowed in recent weeks, as the spread between origin markets and the US Gulf coast has become less attractive than it was in June.
The US Environmental Protection Agency (EPA) finalized its record-high 2026 and 2027 biomass-based diesel blending mandates in March, covering renewable diesel, biodiesel, and SAF. The 2026 mandate represents a 60pc increase from the previous year, with targets set at 9.07bn renewable identification numbers (RINs) for 2026 and 9.20bn RINs for 2027. The announcement removed much of the uncertainty that had weighed on the industry throughout 2025 and provided a clearer demand outlook for biofuel feedstocks in the US.
The higher mandates translated into stronger demand for feedstocks such as tallow on the US Gulf coast, where prices climbed to a record high of $1,995.81/t on 3 June. Elevated domestic prices opened arbitrage opportunities for imports during the first half of the year, supporting a recovery in overseas shipments.
Although US tallow imports have yet to exceed their historical highs in 2026, they have rebounded significantly from lower levels early in the year. The recovery had boosted confidence among overseas suppliers, who expected import demand to continue strengthening through the remainder of 2026. But the new tariff measures have added fresh uncertainty to that outlook, raising questions about future trade flows and the competitiveness of different supplying regions.
This has renewed attention on Europe as a potential destination for Brazilian tallow. European traders do not expect the US tariffs on Brazilian tallow to result in a significant increase in imports into the EU.
Market participants had explored diverting Brazilian volumes to Europe when US tariffs reached 50pc in the second half of 2025, but shipments were limited, partly because veterinary approvals, certification requirements and border controls restricted market access. As a result, only small volumes arrived in early 2026 despite concerns over a potential influx.
The latest 37.5pc tariff is therefore unlikely to change trade flows materially. Although Spain's RED III implementation is expected to support category 3 demand from 2027 by rewarding greenhouse gas emissions savings and leaving category 3 outside the 1.7pc Annex IX Part B cap, traders said freight costs, high energy prices and regulatory hurdles continue to prevent a viable Brazil-Europe arbitrage.
Some market participants instead expect lower US imports from Brazil to support European exports to the US.
Most European suppliers to the US do not expect an immediate impact from the latest tariff measures, noting it is too early to assess any shift in trade flows.
Under EU animal-by-product rules, tallow is classified into categories 1, 2 and 3. Categories 1 and 2 are recognized as waste feedstocks under RED III Annex 9 Part B, while category 3, although not listed under Annex 9, remains an established biofuel feedstock. Typically, lower-grade category 3 tallow with 10-15pc free fatty acid (FFA) content is exported to the US, while higher-quality material with 5pc FFA or below is consumed within Europe.
